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Closing Bell With Maria Bartiromo

News/Business. Maria Bartiromo. Analysis of the day's winners and losers in the stock market. New.

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Us 15, Erskine Bowles 9, America 8, Alan Simpson 8, Washington 5, Bob 3, Obama 3, S&p 3, China 3, Aetna 3, Chicago 3, Grover 2, Grover Norquist 2, Carl 2, Geico 2, Mark Bertolini 2, Simpson Bowles 2, John Boehner 2, Mandy Drury 2, U.s. 2,
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  CNBC    Closing Bell With Maria Bartiromo    News/Business. Maria Bartiromo. Analysis of the  
   day's winners and losers in the stock market. New.  

    November 15, 2012
    4:00 - 5:00pm EST  

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stick around. do not miss maria's exclusive with mr. simpson and mr. bowles coming up on the second hour of the "closing bell." see you tomorrow. and it is 4:00 on wall street. 3:00 p.m. here in chicago. do you know where your money is? hi, everybody. welcome back to the "closing bell." i'm maria bartiromo coming to you from chicago today. the market lower once again on more fears over fiscal cliff and the uncertainty over tax rates in 2013. in a few minutes, i'll be speaking to the men behind the campaign to fix the country's debt, alan simpson and erskine bous. take a look at how we're settling on wall street today. the market did end off the worst levels of the session. nonetheless, we continue to see a decline. the markett down about 5% since the election. we continue to see a deterioration here. the nasdaq gave up about ten points at 2836. the s&p flat on the night, down
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about 2.25 points. the market closing lower once again today, adding to the losses we have been seeing since the election. is a deal in washington what investors are waiting for to get back into the game? joining me now is ben pace from deutsch back private wealth management, scott collier and our own mandy drury. good to see everybody. ben pace, what is behind this selling, and when will it end? what's your take? >> i don't think it's really economic right now, maria. i think it's pretty political. every pronouncement we've heard over the last four, five days has decreased the likelihood we're going to have a quick resolution of bargaining that has to happen in washington. again, it has to happen. it increases the likelihood that we fall off the cliff for lack of a better term. we still don't think that's over the 50% probability. it was probably 25 to 30 mow. that's why the markets are where they are. they're starting to hit levels now where they're looking attractive from a dividend yield
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perspective, distance from our targets at year end, they're starting to look more attractive at the 1350, 1355 level. >> so you would put money to work at that 1355 level on the s&p 500? >> this is an area where we're getting interested. we took some money out in september and october thinking that this might happen. i think with the floors we're seeing here, this is the area we're getting interested. >> scott, what do you any? you have to operate your business regardless of what's going on around you. what do you want to do in this tested period we're all in right now as we approach year end with no clarity on tax rates? >> well, maria a, i think all of this is leading towards clarity. it's all a leading towards certainly, whether it's good or bad. obviously, the conversation we're having today, the conversation that we've been having ever since the election is building up towards a very painful resolution of spending and taxation, which i think will provide more certainty.
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i was always raised in the school of not fighting the fed. i'm not going to start now. i think i would rather be where the fed is pushing money. that's equities. i think i'd be pushing towards being more exposed in equities, especially at these levels. >> even though we see this deterioration with the uncertainty. you basically say the fed is going to, at the end of the day, be a bigger influence on the markets. >> i think the fed has been a big influence for a very long time on the markets. >> absolutely, years. >> i think we underestimate the force of monetary policy. right now, monetary policy in the united states is as easy as it's ever been, and globally, it's as easy as it's ever been. that's an important thing to remember. no matter what happens with the fiscal cliff, whether we go off or whether we stay out, the point is it will bring certainty. it doesn't feel good, but it's a process, and we're making it through the process.
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therefore, i want to be where the money is going. i want to be in the equity market. i think that's where you'd want to have most of your exposure at this point. good place to get in, valuations are reasonable. i think the future and next year looks very bright for companies and profits. therefore, equity prices as well. >> mandy drury, what are the other catalysts? the problem is, if, in fact, we were to enter recession in 2013, that hits earnings, which has been the strongest part of this recovery. >> absolutely. we really do need to get out there and try and find the good things in this market. i was listening to matt a moment ago. he was saying he's really not ready to buy. it feels like there's a buyer strike out there. a lot of fatigue. think about all the bad headlines. fiscal cliff, taxes likely going up, middle east escalating in violence. it really feels like a lot of
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things getting us down. scott was just pulling out some of the things that are positive, like valuations being reasonable. there's plenty of easy money. if there's good news, we have to try and find it. let's hope earnings provide good news going forward. >> well, we could try to find it, but is that going to dictate the market? >> yeah, well, that's a really good question. i think obviously a lot of companies are struggling right now, especially if the company is also struggling. i think there's so much to con tepid with out there. maybe that's a question for some of the other guests as to whether or not we're going get decent earnings going and whether or not that lifts the market out of its slump. >> do you think we see a rebound in earn in the fourth quarter? what are you expecting in terms of that fundamental driver of the markets? that is corporate profits and revenue. >> the last three years you've really seen summer swoons.
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slow down in economic growth. you have housing bottoming and starting to move up. the consumer is deleveraging. consumer spending should be reasonably good. businesses have a lot of cash. you hope they'll start to spend a little bit. i don't think there's going to be a huge refwhoubound in earni. i think the 2013 earnings should be up mid-single digits. i don't think it's going to be 15% year next year, but i think it will be mid to high single digits. >> sounds like they're not expecting more than that anyway. so at least that's priced in so far. thanks, everybody. we appreciate it. ben, scott, mandy, thanks. see you later. meanwhile, there's the financial services sector to tell you about as well. more bank stress tests. let's get to mary thompson. she has this breaking news on the stress tests in the banks. >> that's right. the federal reserve releasing its outline for the stress test for 2013. banks will be stressed under three different scenarios as
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mandated by dodd frank as oppose to two last year. the worst case scenario has stocks dropping 50% here in the u.s. and unemployment spiking another 4%. what's different this year in the worst case scenario, the federal reserve is including a hypothetical slip down in asia with additional weakness in china. back to you. >> all right, mary. thank you so much. keep it right here. alan simpson and erskine bowles are next on this special "rise above" edition of the "closing bell." coming up, fixing the fiscal mess. alan simpson and erskine bowles sit down with maria on the eve of the critical meeting between the president and congressional leaders. could their plan be the key to stopping america from going over the fiscal cliff? this exclusive event is next right here on this special edition of the "closing bell." iy stock screener, you can try strategies from independent experts
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all right. welcome back. we have a hot show for you today. we are getting down to the brass tax on the fiscal cliff tomorrow. president obama and congressional leaders meet face to face with the clock ticking to new year's on the fiscal cliff. for nearly two years, the one plan that has gotten the most support among those outside of washington and even inside has been the simpson/bowles plan. the two, of course, chaired president obama's debt commission. two years ago when the plan was presented, it was all but ignored by those in power. joining me now, the two architects behind the plan,
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former republican senator alan simpson and former chief of staff for democratic president bill clinton erskine bowles. gentlemen, wonderful to have you on the program. i want to first get to this. have either of you or together both of you been asked to participate in any way in these fiscal cliff negotiations? >> i've talked to most of the members of the white house. i met over the last couple of days with what's called the gang of eight, four republican senators and four democrat senators. i'm going to update alan as soon as this ends. >> senator, you have not been involved in these talks so far. >> he's an hour away. i'm all day away. i live in wyoming. today we're 2 1/2 hours late getting out of denver. i have to get my good threads on later. erskine is the numbers guy. he's done this before. he's the last human being on earth to balance the budget in 1996. he knows the game. he furnishes it back to me.
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he has my proxy on every occasion. >> we work on it together. >> i guess we're all trying to figure out why it is that the plan has gotten blown off for, you know, a bad choice of words, maybe. everyone that i have spoken with believes that your plan had the most credible way to actually get our arms around the debt and deficit of this country. why do you think -- >> because the problems are real. the solutions are all painful. there's no easy way out. these guys who are running for public office worship that great god of re-election and haven't been focused, i believe, on what's really right for the country. if, in fact, you focus on what's right for the country, you're always going to come down to a solution that reforms the tax code and makes the entitlement programs sustainabley softened. >> they're going to savage this
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plan. >> unbelievable. senator, earlier this week, you said basically don't count on a fiscal deal before automatic spending cuts and the tax hikes take effect on new year's day. why are you so pessimistic? >> i used to be rather hopeful, but when you see the same statements come up that came up before the campaign that come up after the campaign, you can't be hopeful. i mean, taxes and entitlements. no taxes on the rich. i mean, the rich want to be taxed. i don't know why we don't tax them. you could tax the rich into oblivion. who is kidding who? >> i mean, yesterday president obama made it clear that he not only wants to tax the rich, he wants to raise tax rates, but he also wants to close loopholes. the closing of the loopholes is part of your plan. let's talk about that. then reducing rates as well is part of your plan. so why do you differ in terms of what the president said yesterday? he came out with a number.
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$1.6 trillion was the report before he came up to the podium, which is double what he was talking about with boehner next year. talk to us about how your plan works. >> the interesting thing is if you look at the amount of income tax paid, it's about $1.3 trillion. 1. 1 from individuals, 200 billion from corporations. people always ask how can our marginal rates be so nominally high and net so little money. the reason is we have $1.1 trillion of back door spending in the tax code. that's for deductions for credits. what we said is, look, let's wipe out all of those. let's broaden the base, simplify the code. let's use 92% of that money that we're using from getting rid of the tax expenditures to reduce income tax rates and 8% of the money or about $100 billion a year, to reduce the deficit. $800 billion a year over ten
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years is where our $1 trillion of our $4 trillion comes from in our deficit reduction plan. >> and what rate are you going change? 8%, you know, 0 to 70 grand. 14 over that. take the corporate rate to 36. if you can't do that, you can't tax your way out of this. you can't cut spending your way out of this. you can't grow your way out of this. so grab hold. it's going to be a rocky road. >> you're saying closing the loopholes brings you at least $1 trillion. >> if you're willing to wipe out all of them, and that may not be politically feasible. but you can definitely solve the problem by broadening the base, simplifying the code. >> both the president and john boehner, the speaker of the house, speak to be drawing lines in the sand. so this is why people are now
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becoming like senator simpson and sort of giving up a bit on a deal before year end. they're drawing lines in the sand over raising tax rates on the rich. i want you to listen to what they both said yesterday. listen to this. >> you've said that the wealthiest must pay more. would closing loopholes instead of raising rates for them satisfy you? >> i think there are loopholes that can be closed, and we should look at how we can make the process of deductions, the filing process easier, simpler, but when it comes to the top 2%, what i'm not going to do is to extend further a tax cut for folks who don't need it. >> the issue there is we are not going to hurt our economy and make job creation more difficult, which is exactly what that plan would do. there are ways to put revenue on the table without increasing tax
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rates. >> what's your reaction? >> i'm actually more hopeful than al is. >> you used to be more depressed. what's gotn n tten to you? >> i spent the last few days here. i am more hopeful. we got a democrat president who's in his second term, who's been willing to put entitlement programs on the line. we got a speaker, a republican, who really gets it, who understands that we have to have some decisi additional revenue. we have over half a senate who have embraced a balanced plan like we've proposed. and we've got this fiscal cliff, which will force action. i think they are pretty pitch saying the same thing. both of them are saying we have to have revenue. the president says, look, i want that revenue to be real. the only way i don't know fknow real for sure it to raise the tax rate. the speaker is saying there's a
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better way to do it. that's by reducing the spending in the tax code. i think he's probably willing to confine it to the top 2%. what we have to do is find that middle ground where we make sure so the president knows that we're going to get that money but we're going to get it in the most productive, economic way we can. >> the speaker's point is you don't want to be raising tax rates now at such a fragile time in the economy. we've already watched the stock market sell off, you know, 5% in the last week because of this uncertainty over where their tax rates are going. >> i am really worried that we won't get to a deal. i know we can get to a deal. i know how to get to the deal. we get there by taking some of the money from revenue and some from reducing spending in the tax coat and cutting defense and nondefense and other mandatory spending. you know, that's how we get there. i think that's pretty easy to understand. what's worrisome is if we get over the cliff, we don't have a deal, and the market doesn't
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anticipate that we're actually going to be so stupid as to go over the cliff, then i think you'll see the market really crash, and i think you'll see the rating agencies downgrade our credit again. you'll see fitch and moody's join s&p. i think you'll see corporations lose confidence as to what we're going to do, where we're going to go. i think you'll see them slow down hiring and stop capital expenditures. we'll be in a hell of a mess. >> this is not where we want to go. >> we don't want to bet the country, especially when there are alternatives to get it den. >> it upsets me you're worried we're not going to get a deal. that's how i felt. >> i think there's a one-third probability we'll get a deal in lame duck. about one-third we'll go over the cliff and be able to reach a deal right afterwards. that'll be okay. b but there is that one-third chance we won't and end up in chaos. >> the markets have felt that no one would be dumb enough to let this happen. now they can see that it is
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indeed possible. this could happen. now they finally sobered up. they were playing it all to be done. no one had ever let this happen. it can't possibly happen. well, mer ry christmas. >> you're absolutely right. we're going to take a short break. we've been talking about taxes. we're going to get into the other side of the ledger. we're going to talk about spending as well as tax rates. stay with us. we have this exclusive with erskine bowles and al simpson. back in a moment. ans believe the in charge of their own future. how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future. ♪
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i'm not going to ask students and seniors and middle class families to pay down the entire deficit while people like me making over $250,000 aren't asked to pay a dime more in taxes. >> raising tax rates will slow down our ability to create the jobs that everyone says they want. >> we should not hold the middle class hostage while we debate tax cuts before the wealthy. >> i've outlined a framework for how both parties can work together to avert the fiscal cliff without raising tax rates. >> welcome back to this special edition of the "closing bell." i am back with our exclusive interview, erskine bowles and senator simpson, the gentlemen behind the architects of the debt reduction plan for america that everyone talks about and
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has the most credibility out there. gentlemen, we were just hearing about tax talk from the president and from john boehner. we've been talking a lot about tax rates. it seems that's dominating the conversation. what about spending? aren't we talking about a very small number in terms of revenue that you can actually get from the so-called wealthy, more than $250,000? in the overall scheme of things, is that going to move the needle on our debt? shouldn't we also be talking about spending cuts? >> we're talking about getting between between 80 and $100 billion a year, which is no small number from revenue with when you consider the fact we have a $1.1 trillion deficit, that's not going to solve our problem. we must also reduce spending if we're going to put our fiscal house in order. >> senator? >> people are always saying, what should we cut? what spending would you like to cut? they say waste, fraud, and abuse. all earmarks, foreign aid, nancy pelosi's aircraft, all
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compensation for congress. that's nothing. that's about 4% of where we are. you get spending cuts by going into the entitlements programs. these things are on health care -- doesn't matter what you call it. it's an automatic pilot. all you have to do is look at the demographics and the fact that all these things are happening. health, obesity drugs. you're taking care of them all. >> medicare and medicaid, how realistic are we going to get some cuts here? these are the biggies. >> better get realistic. we can't do it. >> we spend twice as much as any other developed country in the world on health care. twice as much. that might be all right if, you know, our outcomes were twice as good as anybody else's. but they're not. we rank somewhere between 25th and 50th in such important measures as infant mortality, life expectancy, preventable death. anybody who doesn't think those 32 million people who don't have health care insurance don't get
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health care, they get health care today. they just get it at the emergency room at five to eight times the cost of being at the doctor's office. that cost doesn't go away. it gets cost shifted to the taxpayers in the form of higher insurance cost and higher premiums and higher taxes. >> you don't have to have a brain to know that when you take care of a pre-existing condition in a 3-year-old child that will live to be 60 when one person in the united states weighs more than the other two, that's a statistic, diabetes a and b, booze, drugs and dope. and these guys think they're in a preventive health care program. the drinks are on me. then you have to do tort reform. you have to do something with doctors. you have to have hospitals keep two sets of books. then this guy gets an operation and doesn't get a bill. >> we spent 10% of the budget in 1981 on health care. today we spend 25% of the budget on health care. by 2020, we'll be spending
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one-third. it won't be long before all we'll be able to do in this country is take care of a couple old koots like me and al. >> this is really important. that's a scary number. i think when we talk about medicare and medicaid, you know, americans get it. the people buy in. we should point out the crowd that is around us right now, everybody. everybody here wants to hear your proposal. show the crowd that's watching us. when you talk about medicare and medicaid, it seems like the politicians are afraid to touch it. yet, america realizes the demographics have changed. we're living longer. things have changed in the country. yet, these entitlements haven't at all. >> you can't even touch social security. let's say don't touch it. that's a terrible thing to do. don't touch it. in the year 2031, you're going to waddle up to the window and get a check for 25% less. why is that? who is kidding who? >> social security is $900 billion cash negative over the
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next ten years. social security will go broke in 2031. as al says, when you waddle up to the window to get your social security check, you're going to get 25% less than the scheduled payments. what we want to do it make the kind of changes you have to make to make social security sustainable. let's make it real. people in my generation have simply made promises we can't keep. let's change it. let's fix it. let's make sure we can deliver on what we promised. >> and disability insurance will be dead in the water in four years, gone. i.e., zip. you know, what are we going to do about it? fog. >> yet, we keep kicking the can down the road. i want to talk about that and what the implications are. we have to get into the fiscal cliff and the fed stimulus. when you came out with your plan initially, the fed had pumped all this money into the economy. how do things change since then? we're going to get back to that. first, let me get back to headquarters. there's a lot of stock stories in the after hours. we want to bring them to you.
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here's a quick market flash. >> that's right. nike announcing a two-for-run stock split and dividend boost. that's up as a result. gap reports earnings per share of 63 cents, in line with expectations. better than expected revenue. they also upped their earnings guidance. pc maker dell misses by a penny on the bottom line. that's the fourth straight quarter of profit decline. that's a big one. we're going to continue to watch that. you can see shares have now fallen in the after hours trading, down a percent. maria. >> all right, court. thanks very much. our special "rise above" edition of the "closing bell" continues. we have alan simpson and erskine bowles here with me in the house. later, we'll get a reaction from etna ceo on the debt. wait until you hear their fiscal cliff contingency plans. back in a moment.
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so much pain coming from the economic downturn recession and this fiscal cliff, which is why i'm in town.
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there's real jeopardy, you know. this sequestration, should it happen, we know there's going to be cuts. we understand that. not cuts that cost lives. >> well, you just heard him. even u2 front man bohn knno is worried about the fiscal cliff. he expressed his concern about what automatic spending cuts would mean. those cuts, of course, on the table. back with me once again, alan simpson and erskine bowles. you said there are five things we need to discuss. health care, we're talking about it. defense, i want to get into it. tax code, we're talking about it. social security and interest on the debt. there's a whopper. let's talk about interest on the debt. the federal reserve tells us that rates are going to be at rock-bottom levels until 2015. >> we're spending about $230 billion a year on interest. if interest rates were at their
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median level like in the 1990s and the first decade of this century, we'd be spending $650 billion a year on interest. let me put a relative perspective on what $230 billion means. that's more than we spend at the department of commerce. department of education, energy, homeland security, interior, justice, state. in fact, it's more than we spend at all of them combined. maria, if we do nothing, by the year 2020, we'll be spending over $1 trillion a year on interest cost alone. that's $1 trillion we can't spend in this country to educate our kids or to rebuild our infrastructure or to do high-valuated research. unfortunately, it is $1 trillion that's going to be spent in those countries we're borrowing from. we'll be building the infrastructure in asia. we'll be educating those kids over there. it means we'll be building their universities so the research is
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done over there so the next new thing is created over there so the jobs of the future are there, not here. that's crazy. >> i think i know the answer to this next question, but i mean, what is a better outcome for the long-term fiscal health of the country? kicking the can down the road or leaving the status quo on spending and taxes or going over the fiscal cliff? i mean, do we need to go over the fiscal cliff with the four spending cuts and tax hikes to get things moving? >> there are leaders in both parties who think it would be to their advantage to go off the fiscal cliff. what a wonderful trait that is. we can win more as democrats if we let it go over. we can win more as republicans. this whole game is about win or lose. it's not about america. it's about how do we make the dems lose and how do we make the republicans lose. people are sick of that, and they're ashamed to have and disgusted. they show that time after time. i can tell you, you can't believe what we've dug up. when you get a vote from dick durbin of illinois and a vote
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from tom coburn of oklahoma, you get five democrats, five republicans, one independent, 60% of this group that vote for this, you know you're on the right track. >> maria, if we go over this fiscal cliff and don't get a deal immediately, what's the economic effects next year? you know, we've talked about some of the qualitative effects. quantitatively, you know, economic growth will be reduced by about 3%. we're only growing at 1.5%. that means by definition, we're automatically back in recession. another 2 million people will lose their job. unemployment will go to over 9%. why would we do that? that's a debt of a country. why would we do that when we know that we can come together and get a deal if we just put the partisanship aside. >> let's go through the numbers for a minute. assuming the dems can deliver the senate on the plan, both of you know how to count the votes. be specific in terms of the internal head count in the
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house. how do you actually get there? >> well, number one, you can't even do it in the senate and shouldn't do it in the senate unless you get a bipartisan vote. we've been going around. we've taken our 64-page report that is in plain english. uses words like "going broke." and we put it in legislative language. it's now about 650 pages. we've been socializing that around the senate. we probably got as many as 47, 48 members of the senate who have embraced this plan. 24 republicans, 23 democrats. we've got about 130 house members. about an equal number of republicans and democrats. 130 isn't 218 in the house and not 60 in the senate, which is what you need. that's why we have to have the leadership from the house and senate and from the white house agree to come together, put some of this partisanship aside, pull together. >> have you turned a little less optimistic over the last couple of days?
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i know your plan recommending $3 spending for every dollar in tax increases. assuming the recent statements from mr. obama and mr. boehner are accurate, the dems are moving away from that. the president and the democrats seem to be moving away from that. why do you think that is, and is this important? >> let's assume for a second the president is right and we need $1.5 trillion of revenue. now, i think there's a better way to get there and a different way to get there. the president, you know, i think is open to some of these ideas. but if we're going to have $1.5 trillion worth of revenue, we need about $3.5 trillion worth of real spending cuts. that would come from defense. it would come from entitlement programs. it would come from the other mandatory programs. that's what makes the most sense to take it from because those are the areas that are really growing at an accelerated rate, faster than the rate of growth of health care. i think that's doable. i think we can find the votes to do that because i think the american people are way ahead of
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the politicians. they realize we got a real problem in this country and we got to fix it. >> what do you think, senator? i want to talk about defense. >> well, you should talk about defense because our defense budget is about $740 billion. the defense budget of every other major country on earth, including russia and china, combined, is $540 billion. you think we're all right? i don't know. i think so. if you really want to dig in, we said, how many contractors do you have? what do you do? oh, i'm a contractor with the defense department. or it might be the guy who makes something for 50 cents and sells it for $2. what's the range on contractors? it's between 1 million and 10 million. we'd like an audit. could we have an audit of who they are and what they do? i was a military guy. i was in for a couple years in germany. they have their own health care plan called military retirees. only 2.2 million of them.
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that's not a big cohort. many of them have never been in combat. they have their own health care plan. the premium is $540 a year with no copay. it takes care of all dependents. there are 61 department of defense schools still in america from wars long past to take care of dependents. they're right next to a bus ride for a public school. they all have a superintendent and principals and teachers and the cost per student is $51,000 a year. i mean, grab hold. >> chairman of the joint chiefs of staff, when asked what our facing's greatest national security problem was, he didn't say the terrorists. he said these deficits because they will consume every dollar of resource that we have. let me give you one example of how crazy it is. today the u.s. has a treaty with taiwan that we'll, you know, protect them if they're invaded
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by the chinese. there's just one problem. we'll have to borrow the money from china to do it. >> unbelievable. we're going to take a short break. with we come back, i want to ask you, what about the fed? where does qe-1, 2, 3, and maybe 4 play into all this? stay with us. more with erskine bowles and alan simpson. stay with us. ♪ [ female announcer ] today, it's not just about who lives in the white house, it's about who lives in the yellow house, the green, and the apartment house, too. today we not only honor the oval office,
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during the final days of our semi-annual sleep sale, save $500 on our classic series special edition bed set plus special financing on selected beds but hurry sale ends sunday. you'll only find the innovative sleep number bed at one of our 400 stores, where queen mattresses start at just $699. well, if itmr. margin?margin. don't be modest, bob. you found a better way to pack a bowling ball. that was ups. and who called ups? you did, bob. i just asked a question. it takes a long time to pack a bowling ball. the last guy pitched more ball packers. but you... you consulted ups. you found a better way. that's logistics. that's margin. find out what else ups knows. i'll do that. you're on a roll. that's funny. i wasn't being funny, bob. i know. welcome back. once again, our exclusive
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interview with erskine bowles and alan simpson here in chicago. gentlemen, you both co-founded the fix the debt group, which essentially pushes your plan from the debt commission. so it was largely the inspiration for us here at cnbc for our "rise above" initiative, which i know you're aware of because you have the pins on. if there was more leadership in d.c., would we need to fix the debt or rise above? >> well, look, if we don't have leadership, we're not going to get there. for sure. if these two sides can't put that partisanship aside, as you say, and rise above partisanship and come together, we'll never get there. i think they will. >> we don't get much help from the leadership. either party. >> this is what i'm trying to figure out. your report is so integral to this conversation. everyone who we speak to brings up simpson/bowles. there's no doubt about it. if it's so integral to the conversation and the fix, how come you're getting blown off? what's going on?
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>> you're talk abouting everything. you're talking about home mortgage, interest. you're talking about employer deduction of the employee health care. childcare. for heaven's sakes, parking for employees, oil, and gas. every one of those constituents would like to blow us off. >> sacred cows. >> you bet. of the tax expenditures on the books, only 1% of the american people use 25% of them and 20% of american people use 80% of them. guess who is using that 20% of the people using 80% of that because only 27% of the american people itemize. the little guys never heard of that stuff. >> one of the thorns in your side in terms of getting this plan implemented has been grover norquist. he's engineered -- i'm sorry, what? >> grover norquist, i've always said about grover, he's wandering the earth in his white
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robes, and what can he do to you? he can't murder you. he can't burn your house. the only thing he can do to you is defeat you for re-election. if that means more to you than your country, you shouldn't even be in congress. >> well, he's engineering this plan to not raise taxes ever. >> this is not a problem, you know, that we can grow our way out of. you could have double-digit growth for decades. growth alone won't do it. it's not a problem that we can tax our way out of. raising taxes doesn't do a darn thing to change the demographics of a country or to change the fact that health care grows at a faster rate than gdp. unfortunately, we can't just cut our way out of it either. that's where grover is wrong. you can't cut your way out of it without disrupting a very fragile economic recovery or without cutting the payments that we made to the truly disadvantaged, the income support programs, and you can't cut your way out of it without making severe cuts in those kind
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of things we have to invest in like education and infrastructure and high valuated research that america has to invest in to compete in a knowledge-based global economy. it's going to take a combination of all those. that's why we came up with a $4 trillion plan that was $1 trillion of revenue coming from reforming the tax code and $3 trillion of real spending cuts. >> right, and it's broadening the base and lowering the rate. >> we've got those pledges out of people in the '80s, early '90s when unemployment was down. everything has changed since then. >> everything has changed in just two years with the federal reserve. is the fed bailing out the white house and congress with all this free money and stimulus? qe-1, 2, 3, and possibly 4 now. >> i think we ought to change that to p.m. 1, which is print money number one. that's all this is. >> bottom line, if we do not get our house in order, what happens to america? >> i think that if we do get our house in order, the future of
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america is really bright, and we can compete with the best and brightest. if we don't, we're well on our way to becoming a second-rate power. >> could the u.s. go bankrupt? >> absolutely. absolutely we could go bankrupt. you know, you can't go on with $1 trillion of deficit year after year after year. don't forget, we only take in $1.3 trillion in tax income. we could be spending $1 trillion on interest alone by the year 2020. we can't go on like this. >> we borrow $3,600,000 a day. every buck we spend we borrow. the big bang theory of the universe was 13,600,000,000 years ago. >> unbelievable. very quickly, we going to go over the fiscal cliff? what do you think? >> i think the parties think it's going to be to their advantage, which is so sad because they're betting their country. >> i know you said a third.
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gentlemen, thank you very much. this has been an enlightening, valuable conversation for our e valuable conversation for our viewers. we so appreciate it. we'll see you soon. please come back soon. thank you very much. reaction from the aetna ceo, who is preparing his country in case we do go over the fiscal cliff. stay with us. [ female announcer ] want to spend less and retire with more? then don't get nickle and dimed by high cost investments and annoying account fees. at e-trade, our free easy-to-use online tools and experienced retirement specialists can help you build a personalized plan. and with our no annual fee iras and a wide range of low cost investments, you can execute the plan you want at a low cost. so meet with us, or go to etrade.com for a great retirement plan with low cost investments. ♪
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welcobackeverybody. thanks very much for joining us. i just want to say to all of our viewers, i got your notes, i got your e-mails, your tweets. don't think i didn't. and i asked erskine bowles is he going to become our next treasury secretary. he said emphatically no. i wanted to ask him while we were live, but we were knee-deep in the debt discussion. he said no. my next guest has emphatically stated that going over the fiscal cliff would hurt jobs and the economy. in fact, he's got a contingency plan in place that calls for layoffs at the company if washington does not make a deal. mark bertolini is with me. he is the ceo of aetna. good to have you back on the
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program. thanks very much for joining us. >> good afternoon, maria. >> your reaction to the simpson-bowles conversation. >> great conversation. i've worked with them on the fix the debt campaign, and i think they lay out the issues fairly clearly. and with a little bit of humor. >> okay. you've said that if we go over the fiscal cliff, you'll probably lay people off. tell us about your contingency plan. do you think we'll go over the fiscal cliff based on what you've been hearing, and what's your plan if we do? >> you know, i think we have the opportunity to put something together before we go over the fiscal cliff. i think it would be insanity to go over the fiscal cliff. and our current operating plans are focused on not doing that. so i would emphatically declare that this would be -- i think it would be washington not paying attention to the pragmatics of what the populous needs, and by
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pushing us over the cliff. a negative 1.7 gdp in the first quarter could cost jobs, two million jobs, which would take unemployment up. when unemployment goes up, spending goes down. when spending goes down, that means people aren't buying products. and across our economy, when peel aren't buying products, we need less workers to buy those products. so i think that's the natural evolution of how this moves ahead. so i think it's imperative that we get this problem solved in the next 45 days. >> but like i always say, mark, you've got to run your business regardless of what's going on around you. you've got to move forward. you've said if we go over the fiscal cliff, you're going to lay people off. you're going to have to lay people off. so what exactly are your plans if we go over the fiscal cliff? >> we have contingency plans in all of our operating plants that we operate with that say here's what we will do if these things happen. now, our intention is not to do that. but we are prepared to react to the market if we need to. and so those are part of our
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operating plans every year we do them. based on what we think the macroeconomic environment is going to do. >> so you were at that meeting at the white house this week. you joined a number of ceos at the white house yesterday. did the president give you hope that layoffs can be avoided at aetna? how was that meeting? >> i thought the meeting was a very constructive, very frank and open dialogue. i was impressed with the level and the grasp of the issues that the president had and his willingness to listen to american business about the ways that we needed to solve this problem. i think there is is a path to get this done. it's not going to get all done before the end of the year. but i think our message to the president was we're here to support you if you can avoid the cliff and put together a very specific framework on how we're going to get the economy going. because going over the cliff creates more joblessness. and if we can avoid that, we still don't grow the economy in
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2013, so we need to show the business community, and quite frankly, all americans, that we have a plan to deal with this deficit so that we can grow e the economy next year, put more people back to work. >> right. all right, we'll leave tlileave. mark bertolini, thank you for weighing in on the topic. we thank you for joining us on this special edition of the closing bell. i'll see you back in new york tomorrow. stay with cnbc. "fast money" picks up right now after this short break. i'll see you tomorrow. have a good night, everybody. [ male announcer ] this is joe woods' first day of work.
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